Revenue Package Not Built to Last Over the Long Termhttp://budgetandpolicy.org/schmudget/revenue-package-not-built-to-last-over-the-long-term
<div>By Kelli Smith, policy analyst, and Andy Nicholas, associate director of fiscal policy</div>
<div>&nbsp;</div>
<div>In a legislative session where the central question was how to come up with the billions of additional dollars required to fund schools now and in the future, lawmakers settled for a short-term revenue solution that will not sustain our schools and communities in the long run. While it’s good that there’s at least some new revenue to support our schools, much more needs to be done to fund our schools and strengthen our state economy well into the future. Lawmakers should have included more equitable and sustainable property tax reforms in the revenue package, and they should have removed more unnecessary and wasteful tax breaks.</div>
<p>&nbsp;</p>
<h2>Property Taxes</h2>
<p>The property tax reforms that were passed by the legislature and signed into law by Governor Inslee are far from perfect, but they will generate much-needed new revenue for schools – at least in the short term. Under the enacted plan, beginning in January 2018, the state property tax will increase by about 80 cents to $2.70 per $1,000 of assessed value. This will generate about $1.6 billion in new revenue for the current 2017-19 budget cycle and about $2.5 billion in the following cycle.</p>
<p>This increase in the state property tax will be accompanied by a shift in how local school district property taxes are applied. Beginning in 2019, the new maximum local levy for a school district will be the lesser of one of the two following amounts: the amount raised by a tax of $1.50 per $1,000 assessed value or $2,500 per student in the district.</p>
<p>In many areas of the state, this change will result in significantly lower local school district levies compared to those currently in place. Those reductions will offset the overall increase in state property tax revenue. However, the full impact of this on state and local property tax resources that will be available to fund schools isn’t clear yet, because an official estimate of this local property tax reduction has yet to be released.</p>
<p>Although the property tax reforms will infuse some new investments in Washington’s schools, there are significant drawbacks to this plan. Thousands of lower- and middle-income households living in areas of the state with high property values will see a significant spike in their property tax bills. Even though many families living in areas of the state with low property values will see an overall reduction in their property taxes, there’s nevertheless good reason to think the plan will, on balance, make Washington’s tax code more inequitable. That’s a concern, considering Washington state already has the most upside-down tax code in the nation, with low- and middle-income households paying up to seven times more in state and local taxes as a share of their incomes than those at the top of the income scale.</p>
<p>Furthermore, because lawmakers failed to eliminate a <a class="external-link" href="it2019s-time-to-strengthen-our-property-tax-code-to-invest-in-schools">damaging law</a> that restricts property tax revenue growth to a maximum of 1 percent per year, the plan will not provide a sustainable stream of resources for schools past 2022. Since it first went into effect 15 years ago, the law has continuously starved communities of the resources they need to adequately support schools, public safety, and other core investments that serve all Washingtonians. Under the new plan, the law will be suspended for the next four years.</p>
<p>Lawmakers must work to permanently eliminate this cap. If they don’t, all the funding progress achieved this year will quickly evaporate once the 1 percent cap goes back into effect in 2023. And, because the costs of heating classrooms, operating police and fire departments, and providing health care services outpace the arbitrary 1 percent growth limit on property tax revenues, lawmakers will, once again, find themselves dealing with a funding crisis of their own making.</p>
<h2>Tax Breaks</h2>
<p>Lawmakers did wisely agree to close a few tax breaks. But when it comes to tax breaks, it was still one step forward, two steps back. Because this package also creates or extends 13 new loopholes (although the governor subsequently, and wisely, vetoed&nbsp;two of them).</p>
<p>An unnecessary sales tax break on bottled water was mostly eliminated; only people who don’t have access to potable water will still be able to claim it going forward. And a costly loophole was closed that allowed oil refineries to claim a sales tax break that was originally intended just for sawmills. Eliminating these breaks is a <a class="external-link" href="washington-should-invest-in-thriving-communities-instead-of-paying-out-special-interest-tax-breaks-1">good move</a>. It means more resources will be available for investments that benefit all of our communities.</p>
<p>Lawmakers also took sensible steps toward creating a more level playing field for small brick-and-mortar businesses located in our state. They closed off a large sales tax and business and occupation (B&amp;O) tax break that has allowed businesses like eBay and Overstock.com to avoid collecting sales taxes from customers located in Washington state. Going forward, large internet retailers will now face strong incentive to begin charging sales taxes on purchases made by Washingtonians. If they choose not to do so, they will be required to provide detailed customer data to the State Department of Revenue, so it can collect the delinquent taxes directly from those customers. In states that have adopted similar laws, many companies have chosen to collect sales taxes rather than risk upsetting their customers by supplying their personal information to state revenue agencies.</p>
<p>By creating or extending more than a dozen new tax breaks, however, the legislature took major steps backward when it comes to cleaning up our loophole-ridden tax code. Our state already has nearly 700 tax breaks on the books. It does not need any new tax giveaways.</p>
<p>Governor Inslee wisely vetoed two of the most egregious new tax breaks. He refused to enact a wasteful B&amp;O <a class="external-link" href="governor2019s-veto-of-unnecessary-short-sighted-tax-giveaway-the-right-move-for-washington2019s-future-1">tax break for manufacturers</a>&nbsp;that would have converted $39 million per year in revenues that currently support schools and other community investments into tax benefits for corporate shareholders and consumers that mostly live elsewhere.&nbsp;</p>
<p>The governor also took a step to strengthen our state’s environment by vetoing a sales tax exemption on a coal-fired electricity-generating plant owned by a Canadian company (TransAlta) that is currently scheduled to shut down in 2025. The <a class="external-link" href="https://www.climatesolutions.org/article/1498848944-wa-state-budget-isnt-funding-new-fossil-fuel-projects">exemption</a> would have applied to materials and equipment used to convert the coal plant to burn a different type of dirty fossil fuel, natural gas. Given the very real dangers that global warming and air pollution pose to the health of our communities, lawmakers should not be subsidizing any form of energy based on fossil fuels and should instead focus on transitioning to cleaner, more reliable energy sources.</p>
<h2>Missed Opportunities</h2>
<p>In its revenue plan, the legislature missed some major opportunities to ensure the long-term economic strength of our state and to clean up the tax code. They should have eliminated the <a class="external-link" href="lack-of-a-state-capital-gains-tax-means-wealthiest-1-percent-get-a-huge-tax-break-in-washington">wasteful tax break on capital gains</a>, which would have raised significant new resources for schools. But disappointingly, the tax break for those who profit from high-end financial assets remains on the books in this budget.</p>
<p>They also should have ensured their property tax plan took steps to improve the equity of our tax code and the long-term sustainability of our budget. In particular, they should have paired their property tax increases with <a class="external-link" href="creating-a-safeguard-rebate-is-key-to-equitable-property-tax-reform">safeguard rebates</a> to offset the costs of higher taxes for middle- and lower-income homeowners and renters. And to dependably and amply fund schools for the foreseeable future, they should have eliminated the damaging 1 percent levy growth cap.</p>
<p>The bottom line is that the legislature’s work does not end here. There’s still a lot more to do to clean up the tax code and provide the kind of resources that make world-class schools and thriving communities possible.</p>
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No publisherKelli SmithProperty TaxState BudgetState RevenueTax Break2017-07-12T20:08:21ZBlog EntryThree Reasons Why a New Tax Break for Manufacturers Is Bad for Washington Statehttp://budgetandpolicy.org/schmudget/three-reasons-why-a-new-tax-break-for-manufacturers-is-bad-for-washington-state
<p>In the final hours of intense, behind-the-scenes negotiations over the recently enacted 2017-19 state budget, lawmakers in Washington state snuck in a major new tax break for manufacturers. This new tax break, which is one of 13 new or extended tax breaks included in <a class="external-link" href="http://app.leg.wa.gov/billsummary?BillNumber=5977&amp;Year=2017">Senate Bill 5977</a>, would reduce the business and occupation (B&amp;O) tax rate applied to Washington state-based manufacturers from the current rate of 0.484 percent to 0.2904 percent over the next four years.&nbsp;</p>
<p>This Senate tax break bill is one of several bills that still need to be signed by Governor Inslee in order to become law. It is bad policy and it should not be enacted. Here are three reasons why:</p>
<ol><li>Once fully implemented, the new break will <strong>eliminate $39 million per year </strong>in funding that would otherwise support schools, health care, and other investments that form the foundation of a strong state economy. Structuring this tax break to gradually phase in allowed lawmakers to balance the state budget over the next four years. But after 2022, the mounting costs of this tax break will make it ever more difficult to balance the budget and adequately fund schools and other priorities.</li><li>It includes <strong>no accountability to the public</strong>. It’s unacceptable that lawmakers neglected to apply any of the standard transparency and accountability provisions applied to other recently enacted tax breaks to this tax break – such as identifying a specific public purpose or goal, designating metrics to assess its success or failure in achieving those goals, or setting an expiration date.</li><li>It will <strong>largely benefit shareholders and out-of-state consumers</strong>. The new tax break might allow manufacturers to very modestly reduce the prices of the goods they sell, but that would mostly benefit consumers in other states and countries where those goods are primarily sold. Manufacturers could also use the tax savings to pad their profits for the benefit of their own shareholders. Either way, that means millions of dollars in resources that would otherwise be used to support communities throughout Washington state will be diverted to other states and countries.</li></ol>
No publisherAndy NicholasState BudgetTax Break2017-07-03T22:55:09ZBlog EntryGuest Post: Kansas Experiment Yields Valuable Lessons in Why State Investments Are Essentialhttp://budgetandpolicy.org/schmudget/kansas2019-experiment-yields-valuable-lessons-in-why-investments-are-essential
<div><em>This week, <a class="external-link" href="http://www.latimes.com/nation/la-na-kansas-tax-20170607-story.html">the Kansas legislature rolled back significant parts of the state’s massive 2012 tax cuts</a>. A two-thirds bipartisan majority voted to reject the “tax-cut your way to prosperity” approach. This was a major repudiation of bad fiscal policies that Congressional Republicans and President Trump are touting as solutions to create economic growth.&nbsp;</em><em><strong>Heidi Holliday, executive director of&nbsp;the Kansas Center for Economic Growth, wrote this guest post:</strong></em></div>
<div><em><strong><br /></strong></em></div>
<p>You’re welcome, America.&nbsp;</p>
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<img class="image-right" src="/images/HeidiHolliday.jpg/image_mini" alt="Heidi Holliday" />
<p>Our state, Kansas, just wrapped up a <a class="external-link" href="http://www.cbpp.org/blog/timeline-5-years-of-kansas-tax-cut-disaster">5-year long experiment</a> in governance from which the other 49 states can now glean some important lessons. The Kansas Legislature has voted to roll back much of the 2012 package of tax cuts that sent the state into a downward spiral of financial instability and weakened the Kansas’ public schools, universities, Medicaid program, and virtually everything else that the state funds.</p>
<p>With the state facing yet another budget shortfall of $900 million, government leaders decided that enough was enough. Governor Brownback, who heralded the 2012 experiment, was proposing yet more temporary band-aid approaches and more cuts to deal with the shortfalls. The Legislature chose a different path and instead sent the Governor a bill that would raise more than $1.2 billion in new revenue over two years by, among other things, repealing a costly tax break for pass-through income, rebalancing individual income tax rates by reinstating a third tax bracket, and reversing course on the governor’s plan to eliminate our state income tax. Brownback vetoed the legislation but, with bipartisan support, the House and Senate quickly overrode the veto.</p>
<p>Our state has begun the path to fiscal stability and is closer to becoming a model of good policy choices as much as it is a cautionary tale. The damage done to Kansas from this reckless experiment will not be undone overnight, but other states need not wait to act upon the lessons learned.&nbsp;</p>
<p><strong>Put simply, revenue matters. You can’t get something for nothing. We all want and deserve thriving communities with great schools, parks, and modern roads and bridges; and we chip in to pay for that. That’s what taxes are for.&nbsp;</strong></p>
<p>Because of the scope of the 2012 changes, it didn’t take long before Kansans in every corner of the state began connecting the dots between the actions of state lawmakers and the quickly eroding quality of the things that make for a good economic foundation in every community. With every subsequent shortfall, the picture became more clear. Meanwhile, the promised economic boom—and the revenue rebound that would supposedly follow—never happened (as economists predicted). In the last few election cycles, voters have viewed candidates and their promises through a different lens, and the 2017 Legislature had the experience and public backing to chart a new course.&nbsp;</p>
<p>Most state tax codes, including ours, need further reform, but it’s high time that state tax policy adhere to one basic, proven (and now proven once again) principle—states need revenue to invest in the things that create thriving communities and a prosperous economy. Kansas just learned this lesson again, the hard way, so that your state doesn’t have to. You’re welcome.</p>
<p><em>Heidi Holliday and her team were instrumental in the legislative victory in Kansas. For more background on the failed Kansas tax-cut experiment and the lessons that can be learned from it:</em></p>
<ul><li><em>Read this statement from the Center on Budget and Policy Priorities, "<a class="external-link" href="http://www.cbpp.org/press/statements/nick-johnson-kansas-wise-to-undo-failed-tax-cut-experiment">Kansas Wise to Undo Failed Tax-Cut Experiment</a>."</em></li><li><em>Read this piece on how current federal tax proposals would emulate Kansas' failed plan, "<a class="external-link" href="http://www.cbpp.org/research/federal-tax/gop-tax-plans-would-emulate-failed-kansas-experiment">GOP Tax Plans Would Emulate Failed Kansas Experiment</a>."</em></li><li><em>See the <a class="external-link" href="http://www.cbpp.org/blog/timeline-5-years-of-kansas-tax-cut-disaster">timeline of Kansas' tax cut disaster</a>.</em></li></ul>
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No publisherMelinda Young-FlynnState BudgetFederal IssuesTax Break2017-06-08T15:05:17ZBlog EntryDon’t Let the Talking Points Fool You: Senate Republicans’ Budget Proposal Is a House of Cardshttp://budgetandpolicy.org/schmudget/don2019t-let-the-talking-points-fool-you-senate-republicans2019-budget-proposal-is-a-house-of-cards
<div>By Andy Nicholas, associate director of fiscal policy, and Kelli Smith, policy analyst</div>
<div>&nbsp;</div>
<p>The state budget is not just a statement of our values. It is also a foundation and framework for delivering the everyday services that benefit us all – like ensuring everyone has the opportunity to thrive, making sure we have clean water to drink and air to breathe, and keeping school buses and fire trucks running each day. Republican leaders in the state Senate have proposed <a class="external-link" href="http://leap.leg.wa.gov/leap/Budget/Detail/2017/soSummary_0321.pdf">a two-year spending plan</a> that would profoundly weaken that framework by slashing vital investments that help Washington’s communities and people prosper – and by failing to come up with the revenue needed to fund schools and other key priorities. Their plan would turn the state budget into a house of cards, at risk of collapsing at the first sign of a slowdown in the economy. And the human cost in terms of the well-being of Washingtonians would be staggering.</p>
<p>Building a responsible and sustainable budget requires lawmakers to take steps toward fixing Washington’s upside-down tax code, which taxes middle- and lower-income households at significantly higher rates than those at the very top of the income scale. Yet the proposal from Republican leaders in the state Senate offers no meaningful reforms to the state’s flawed tax code.</p>
<p>Far from raising the substantial new revenue needed to <a class="external-link" href="funding-schools-for-washington2019s-kids-can2019t-be-done-through-property-tax-gimmicks">fully fund education</a> and protect the programs that help Washingtonians who are struggling to make ends meet, their <a class="external-link" href="mccleary-reality-check-legitimate-solutions-required-to-fully-fund-schools">“levy swap” proposal</a> would actually reduce overall property tax resources for schools in our state. It would also be deeply inequitable, raising taxes on millions of lower- and middle-income homeowners and renters in the Puget Sound region.</p>
<p>What’s more, Senate Republicans actually propose creating or extending nine tax breaks, totaling $13.5 million in giveaways in the 2017-2019 budget cycle.</p>
<p>Rather than working to flip our tax code right-side up and improve our quality of life, Senate Republican leaders propose a state budget that nominally balances, but only with the help of unsustainable gimmicks, such as:</p>
<ul><li><strong>Forcing future lawmakers to make deep cuts </strong>to non-K-12 investments – such as health care, child care, job training, safe communities, and other important investments – by dedicating all future revenue growth to maintaining K-12 spending and property tax cuts.<br /></li><li><strong>Draining $700 million in reserve savings from our state’s rainy day fund,</strong> the budget stabilization account, which is an essential backstop that prevents severe disruptions in funding for our most important services during recessions and other state emergencies. And Senate Republican leaders offer no plan to replenish it.<br /></li><li><strong>Sweeping $63 million from Temporary Assistance for Needy Families (TANF)</strong> <strong>to pay for other unrelated budget items.</strong> TANF is an essential resource for families trying to get back on their feet. This proposal would take much-needed resources out of programs that help the people who have the hardest time making ends meet and dole those resources out for other investments.&nbsp;</li></ul>
<p>As shown in the chart below, the budget proposal from Senate Republicans would boost state funding for education, but at the expense of essential investments in Washingtonians’ economic security and in community development and trust. Within those categories are programs that are essential to many Washingtonians – programs like TANF, Housing and Essential Needs, state retirement contributions for first responders, and the programs we all count on to protect our legal rights. Thousands of Washingtonians’ lives would be severely and negatively affected by these cuts – and in many cases, they are the people who are already struggling just to get by every day.</p>
<p align="center" style="text-align: left;" class="discreet">(Click on graphic to see enlarged version.)</p>
<p><strong><a class="external-link" href="../images/2017_03_21_Senate_Budget_Change_from_Maintenance.jpg"><img class="image-left" src="/images/copy2_of_copy_of_2017_03_21_Senate_Budget_Change_from_Maintenance.jpg/image_preview" alt="Senate budget 2017 graphic" /></a></strong></p>
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<p>The proposed changes to funding, according to the major value areas laid out in the Budget &amp; Policy Center’s <a class="external-link" href="../policy-areas/progress-index">Progress Index framework</a>, are detailed in the sections that follow.</p>
<p><span class="Apple-style-span"><strong>EDUCATION</strong></span></p>
<p>The McCleary Supreme Court case’s school funding mandate has been the most prominent issue in the legislative session so far – and for good reason. Excellent schools are one of the foundations of a thriving economy, and the legislature is facing a deadline for fully funding those schools. <strong>While the Senate’s proposed budget increases K-12 education funding by $1.8 billion, or by 7 percent, it makes huge cuts to early learning </strong>– slashing $36 million from child care programs. This is because the Senate doesn’t actually raise the necessary new revenue to fund K-12 education, despite the speaking points that make it sound otherwise. The proposals include:</p>
<ul><li><strong>Undermining the foundations for high-quality early learning, especially for low-income children and families. </strong>The Senate plan would limit access to Washington’s Early Childhood Education and Assistance Program – our state’s preschool program that serves families living in poverty – by eliminating 3 year olds from the program and not adding any new slots over the next two years despite 23,000 unserved eligible children in the state. It also guts Early Achievers, our state’s key resource for early learning professionals to access coaching and tools to provide high-quality early care.</li><li><strong>Repealing voter-approved education initiatives.</strong> The budget would repeal initiatives 1351 and 732, measures passed by Washington voters to reduce class sizes and fund teacher cost-of-living raises. Refusing to implement voter-approved teacher cost-of-living raises is out of step with the goal of fully funding K-12 education. </li><li><strong>Overhauling the current school funding formula </strong>to change the way state disburses money to schools throughout the state. Even though the plan would require sizeable and commendable new investments in K-12 schools, the Senate has proposed to pay for its plan with a levy swap proposal that would actually <a class="external-link" href="senate-republicans2019-levy-swap-proposal-doesn2019t-do-enough-for-washington2019s-kids"><em>reduce</em> property tax resources</a> for schools compared to the current system. </li><li><strong>Prioritizing STEM and medical education over the needs of struggling working families.</strong> The Senate’s budget provides some increases in the higher education budget. But these investments would come at the expense of the lowest-income working families: $47 million is ransacked from WorkFirst – Washington’s job training and assistance program for families with young children who are trying to get back on their feet – to pay for them. Lawmakers should not be pitting working the needs of families against those of people seeking higher education opportunities.</li></ul>
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<strong><span class="Apple-style-span">ECONOMIC SECURITY</span></strong>
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<p>A community with a thriving economy fosters great jobs and supports working families, ensures stable and healthy housing for everyone, and provides economic opportunity for Washingtonians to meet their basic needs. The Senate Republicans’ proposal eviscerates the parts of our budget that make these values a reality for residents, particularly targeting those programs that relieve hardship among the lowest-income working people. <strong>This budget would cut funding for economic security by $132 million, a staggering 13 percent decrease</strong> <strong>from the amount necessary to maintain current services.</strong> Proposed changes include:</p>
<ul><li><strong>Cutting assistance for people with disabilities at risk of homelessness.</strong> This proposal would do away with the Housing and Essential Needs program that provides housing-related assistance to people unable to work because of disabilities. It replaces it with a new program that would only be available to people with dependent children, essentially eliminating services for seniors and single adults and all but guaranteeing an increase in homelessness. It also cuts another crucial program for people with disabilities – the Aged, Blind, and Disabled program – by limiting the time people can be on it to 36 months.</li><li><strong>Ransacking resources from job training programs </strong>to plug holes in other parts of the budget. The proposal moves $63 million out of the WorkFirst program and uses the money for other unrelated purposes, such as replacing funding cuts to colleges and universities.</li><li><strong>Pushing people off basic assistance and making it harder for new people to get on.</strong> TANF provides basic supports to families with children who are financially struggling. The Senate Republican budget would cut people off the program who have a disability, or people who are needed at home to care for a family member with a disability. It would also require new applicants to prove that they have been unable to find a job before applying for benefits, but it fails to provide necessary help to applicants in their efforts, such as providing for child care while parents are job-hunting. When other states have implemented similar procedural hurdles for families, they saw increases in hardship and spikes in homelessness.<br /><strong></strong></li><li><strong>Limiting options for working families to access child care so parents can go to work.</strong> The plan makes Working Connections Child Care, Washington’s largest child care subsidy program for families with low incomes, more difficult to access by changing eligibility requirements, capping enrollment, and creating more red tape for participants.</li></ul>
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HEALTHY PEOPLE &amp; ENVIRONMENT</strong></span></div>
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<p>Washingtonians enjoy clean air and water and an excellent health care system that supports the wellbeing of a vast majority of Washington’s residents. The state budget provides for those benefits by investing in public health clinics, climate protection measures, and mental health services.&nbsp;<span class="Apple-style-span"><strong>The proposal would increase funding in this area by only $75 million, a less-than-1-percent boost.</strong> The proposals include:</span></p>
<ul><li><strong>Failing to provide adequate investments in mental health services.</strong> Compared to the <a class="external-link" href="a-look-at-how-the-governor2019s-budget-invests-in-progress">budget proposed by Governor Inslee</a>, this budget falls short on the immediate investments to address safety and staffing issues at Western State Hospital – in fact, this proposal would close down two entire wards – and fails to make the investments needed to build a strong community system into the future. <br /></li><li><strong>Missing opportunities to invest in public health, and to safeguard against proposed federal cuts.</strong> As the federal government considers cutting back federal support for health care, it is alarming to see leaders in our state Senate propose underinvestment in our public health system and health benefits for state workers. The budget also threatens the health insurance coverage for tens of thousands of home care workers who support our vulnerable seniors and people with disabilities.<br /></li><li><strong>Threatening health care innovation reforms </strong>that are part of the Washington State Medicaid Transformation Project. This initiative is designed to help Washingtonians achieve better health outcomes, to reward high-quality care, and to curb health care costs in the state Medicaid program. The Senate’s budget would create a roadblock to continuing this initiative and to receiving the $1.5 billion in federal funds it was slated to receive. <br /></li><li><strong>Reducing investments in programs that are protecting our state’s air and water. </strong>The proposal fails to provide resources to adequately sustain work to clean Puget Sound, a clean-up project that is also facing a federal funding threat from the Trump administration’s proposed budget. And no state funding is provided to implement the Clean Air Rule, an effort by Inslee’s administration to reduce carbon pollution in our state. The proposal would also cut or fail to fund investments in restoring salmon and protecting habitat.</li></ul>
<span class="Apple-style-span"><br /></span><strong><span class="Apple-style-span">COMMUNITY DEVELOPMENT &amp; TRUST</span></strong></div>
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<p>Good quality of life for Washingtonians includes safe communities to live in, access to beautiful parks and historical spaces, an open government that runs smoothly and efficiently, and the assurance of transparent and fair elections. <strong>This budget would undermine community development and trust by cutting current programs by $107 million, a 1.8 percent decrease from maintenance levels.</strong> The major changes include:</p>
<ul><li><strong>Failing to invest in tens of thousands of front-line workers, </strong>like nurses, home care workers, child care workers, highway maintenance workers, and other public employees by rejecting collective bargaining agreements already negotiated (with the exception of corrections workers and Washington State Patrol troopers and lieutenants). It also exacerbates ongoing issues with recruitment and retention throughout state government by mandating indiscriminate layoffs at state agencies. This would make it nearly impossible for our state agencies to deliver high-quality, timely services to the public. <br /></li><li><strong>Reducing resources for those who serve to uphold the law for all Washingtonians. </strong>Under this budget, state agencies that work to protect the legal rights of everyday citizens would see huge cuts. The Office of Civil Legal Aid would be cut by $10 million (36 percent) and the Office of the Attorney General, which represents our state in legal matters that benefit us all, such as lawsuits against the federal government, would be cut by $20 million (78 percent). The cuts to the Office of the Attorney General in ongoing funding would be temporarily replaced by shifting one-time resources from a lawsuit.<br /></li><li><strong>Reducing state contributions to retirement systems for first responders.</strong> Contributions to retirement systems are reduced by $159 million (a 74 percent reduction from maintenance levels), largely because of a $109 million cut to retirement contributions for police and firefighters.</li></ul>
<p>The state Senate Republican leaders take a page out of the book of Republicans in the <a class="external-link" href="five-ways-trumps-budget-proposal-would-hurt-washington">other Washington</a> – making deep cuts to the very investments that people throughout our state rely on, and across every area that we use to measure progress. It would be particularly stark for the people who are struggling to make ends meet. And it also includes a host of irresponsible and unsustainable financial stunts that add up to a budget that would collapse under its own weight.</p>
<p>A solid budget framework is the foundation for a strong economic future for Washington and its people. The Senate Republicans should rework their budget with an eye toward strengthening our state’s communities and the foundations that support them.</p>
</div>
No publisherKelli SmithTax BreakState RevenueProgress IndexPovertyEconomic SecurityState BudgetCapital Gains2017-03-30T13:50:15ZBlog EntryWashington Should Invest in Thriving Communities Instead of Paying Out Special Interest Tax Breaks http://budgetandpolicy.org/schmudget/washington-should-invest-in-thriving-communities-instead-of-paying-out-special-interest-tax-breaks-1
<div class="discreet">By Andy Nicholas, associate director of fiscal policy, and Kelli Smith, policy analyst</div>
<div>&nbsp;</div>
<div>To support the foundations that make ours one of the best states to call home, Washington state’s tax code should reflect who we are – a state known for innovation and a commitment to creating thriving communities for everyone. But right now, our state tax code misrepresents our values. It is riddled with nearly 700 tax breaks. And while not all of them are bad, many of them benefit only the most powerful and do little to strengthen our economy.</div>
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<p>Wasteful tax breaks are depriving our communities of billions of dollars that are instead being funneled to large corporations and special interests that have manipulated the tax code in their favor. Those special interests are receiving money that our state could be collecting and investing in public priorities that benefit us all, like schools, utilities, and emergency services.&nbsp;</p>
<p>To support the well-being of our state and its people, lawmakers must take long-overdue steps toward cleaning up our tax code so that it serves all Washingtonians and secures revenue to fund important state programs. They can do that by getting rid of budget-busting tax breaks.&nbsp;</p>
<p>The Budget &amp; Policy Center’s revenue reform plan, <a class="external-link" href="../policy-areas/state-revenue/accountable-washington">Accountable Washington</a>, proposes closing or narrowing 21 of the most wasteful and outdated tax breaks in the code, which would inject $1.1 billion into our communities in the 2017-2019 biennium. They are detailed below.</p>
<p><strong>Narrow the tax break for big oil extractors. </strong>Fuel used by manufacturers or extractors in the process of manufacturing or extracting at the same plant is exempt from the use tax. This tax break was originally enacted to benefit the timber industry, but today, it primarily <a class="external-link" href="http://www.sightline.org/series/big-oils-accidental-tax-loophole/">benefits the oil industry</a>. Curtailing this exemption would end the tax break for all fuel extractors, except on fuel from wood byproducts, also known as “hog fuel.” &nbsp;</p>
<p><strong>Repeal the sales tax break for nonresident shoppers. </strong>Residents of states where there is no or low sales tax – primarily Oregon, Alaska, Montana, and certain Canadian provinces – may make purchases in Washington without paying the sales tax. This exemption was originally enacted to make Washington’s border businesses competitive with neighboring states. However, the majority of exempt purchases from qualifying nonresidents occur in King County, which isn’t a border county. That suggests this break is wasted on tourists who would shop in Washington with or without it.&nbsp;</p>
<p><strong>Apply the sales tax to consumer services. </strong>Washington’s sales tax mostly applies to tangible retail goods, such as cars and appliances. It also applies to many “nondurable” goods such as toothpaste and other hygiene products. That worked pretty well back in the 1930s when consumers spent most of their incomes on these kinds of products. But, as the chart below shows, consumers today spend the majority of their income on services not covered by the sales tax. It makes sense to modernize our tax code to reflect this economic reality. Applying the sales tax to consumer services, such as spa treatments, financial advice, and cable and satellite TV packages would accomplish that.&nbsp;</p>
<p class="discreet">(Click on graphic to see enlarged version.)</p>
<p style="text-align: center;">&nbsp;<a title="2017_03_14_consumption_chart" class="internal-link" href="/images/2017_03_10_personal_consumption_expenditures_goods_vs_services_US_1935_2016.jpg"><img class="image-inline image-inline" src="/images/2017_03_10_personal_consumption_expenditures_goods_vs_services_US_1935_2016.jpg/image_preview" alt="2017_03_14_consumption_chart" /></a></p>
<p><strong>Close the sales tax break on bottled water. </strong>Our state’s sales tax applied to bottled water until 2008, when Washington joined a multi-state effort to conform to a single set of sales tax standards, which excluded bottled water. Since then, this exemption has left millions of dollars on the table each year. Not to mention the negative effects on the environment: Not only does packaging and transporting bottled water contribute to global warming, but empty plastic bottles are also <a class="external-link" href="new-excise-taxes-on-packaged-beverages-would-promote-public-health-cleaner-environment">notorious</a> for filling landfills and clogging waterways. Policymakers can reapply the sales tax to most purchases of bottled water while ensuring it remains untaxed for people who don’t have access to potable water.</p>
<p><strong>Close the sales tax break on candy and gum. </strong>Washington state has a broad-based sales tax. While there are valid sales tax exemptions for some consumer goods, including many grocery items, there is no compelling economic reason why candy, gum, and baked confections should have a tax exemption. Applying the sales tax to these items would generate significant new resources and make the sales tax more broad and sustainable in the long run.&nbsp;</p>
<p><strong>Eliminate a business tax break for large online retailers. </strong>Retailers that have employees and properties located in Washington state pay business &amp; occupation (B&amp;O) taxes on the goods they sell to Washingtonians. However, large online retailers with no employees or offices located in Washington don’t pay any B&amp;O taxes – even though they sell millions of dollars in goods to customers located here. This loophole can be closed by adopting an “economic nexus” approach for the B&amp;O tax. Under this rule, any business that makes at least one quarter of its total sales to customers in Washington state, or that has at least $267,000 in sales here, would be required to pay B&amp;O taxes on their in-state activities.&nbsp;</p>
<p><strong>Narrow the tax break for trade-in vehicles valued over $10,000. </strong>Under current law, the full value of a vehicle trade-in to a dealership is exempted from the state sales tax. We propose limiting this exemption to the first $10,000 of trade-in value. The Citizen Commission for Performance of Tax Preferences notes that this tax break doesn’t stimulate enough additional sales to replace the lost sales tax revenue. Further, the average vehicle traded in at a dealership is valued at $7,500, which means many trade-ins would remain exempt under the proposed $10,000 threshold. &nbsp;</p>
<p><strong>Eliminate the preferential tax rate for prescription drug resellers. </strong>Businesses that warehouse and resell prescription drugs pay a B&amp;O rate that is less than a third of the standard rate for wholesaling. Even though this preference was passed to lure prescription drug wholesalers to relocate to our state, the preference is now available to all drug resellers who do business here, including those operating out-of-state warehouses. This preference no longer serves any purpose except to provide giveaways to prescription drug companies.&nbsp;</p>
<p><strong>Close the public utility tax break for interstate trucking and rail hauls. </strong>Transportation businesses that begin or end their trip outside of Washington state are not taxed on any of their income generated from activities here. Repealing this exemption would subject such businesses to the public utility tax for income received while in the state.&nbsp;</p>
<p><strong>Eliminate B&amp;O tax breaks that no longer serve us, </strong>including for industries such as international investment management services and banking facilities, travel arrangement services like those provided online, and soda sellers. These industries get a break on their B&amp;O taxes even though there’s little evidence that they benefit state or local economies.</p>
<p>The full list of tax breaks we propose to narrow or close can be found in the table below.&nbsp;</p>
<p class="discreet">(Click on graphic to see enlarged version.)</p>
<p style="text-align: center;"><a title="Tax Breaks Table" class="internal-link" href="/images/copy2_of_copy_of_2017_03_03_Tax_Breaks_Table.jpg"><img class="image-inline image-inline" src="/images/copy2_of_copy_of_2017_03_03_Tax_Breaks_Table.jpg/image_preview" alt="Tax Breaks Table" /></a></p>
<p>When our state gives away money to big oil, international investment banking companies, and prescription drug resellers, it can’t use those dollars to invest in the things that benefit us all. It’s time for lawmakers to clean up these wasteful and outdated tax breaks and invest those resources into the things that provide the foundations for thriving communities – from schools to public health programs, and from parks to walkable sidewalks.</p>
No publisherKelli SmithState BudgetAccountable WashingtonState RevenueTax Break2017-03-27T21:01:32ZBlog EntryOur New Revenue Reform Plan Would Hold Lawmakers Accountable to Communitieshttp://budgetandpolicy.org/schmudget/our-new-revenue-reform-plan-would-hold-lawmakers-accountable-to-communities
<div class="discreet">By Andy Nicholas, associate director of fiscal policy, and Kelli Smith, policy analyst</div>
<div>&nbsp;</div>
<div>Great schools, access to health care, safe communities, and other priorities are key to a strong economy and quality of life in our state. By investing in these priorities, lawmakers secure a brighter future for our state and its people.</div>
<div><span class="Apple-style-span"><br /></span></div>
<p>But during the current legislative session, lawmakers are still struggling to find common ground on how to invest in schools and other key priorities. It’s essential that legislators take a bold, equitable path to fund our state’s most important investments and to bring greater balance to our tax code. The Budget &amp; Policy Center has developed a plan that would do just that. This plan, called Accountable Washington, includes a package of reforms that would infuse $2 billion annually into our communities in the coming years, while significantly reducing taxes for Washington households with middle and low incomes. Additional details of the plan are available in this <a class="external-link" href="../files/Accountable_Washington_Fact_Sheet_FINAL.pdf/">fact sheet</a>.</p>
<p>As the chart below shows, taxes would decline by an average of 5.1 percent among the households with annual incomes that fall in the bottom fifth of Washingtonians. Households in the middle of the income scale would see their taxes decrease by 0.6 percent. By contrast, the richest 1 percent would see their taxes rise by 2.1 percent of annual income – a small price to pay for heightened investments in our communities.&nbsp;</p>
<p>Click on the graphic below to see an enlarged version.</p>
<p style="text-align: center;"><a title="Accountable_WA_Distribution" class="internal-link" href="/images/copy2_of_copy_of_2017_02_27_Accountable_Washington_Distributional_4by3.png"><img class="image-inline" src="/images/copy_of_2017_02_27_Accountable_Washington_Distributional_4by3.png/image_preview" alt="Accountable_WA_Distribution" /></a></p>
<p>Given the urgent need to fund state Supreme Court-mandated improvements to schools across the state, all of Washington’s children would be an important beneficiary of Accountable Washington. Further, this plan would ensure that lawmakers can fully funds schools while also keeping up investments in other programs that serve Washingtonians – such as responsive emergency services, clean water, food for kids who are hungry, and job supports for working parents.&nbsp;</p>
<p>While looking to enact solutions to ensure we have adequate state investments, lawmakers should also be mindful not to raise new revenue on the backs of low- and middle-income households. These households already pay up to seven times more in state and local taxes as a share of their incomes than people at the top of the income scale.&nbsp;</p>
<p>Accountable Washington would begin to clean up and rebalance our inequitable tax code in a way that raises billions of dollars in much-needed new resources. Here’s what it would do:</p>
<ul><li><strong>Enact smart, equitable reforms to the property tax, </strong>including eliminating an indiscriminate restriction on property tax revenue and offering in its place a new, targeted property tax rebate, which we call the <a class="external-link" href="creating-a-safeguard-rebate-is-key-to-equitable-property-tax-reform">safeguard rebate</a>, for families earning $75,000 or less. Property taxes are the most significant source of funding for schools, and both state and local property taxes are at the center of the school funding debate. Under Accountable Washington, lawmakers can make the property tax code more sustainable and more equitable by raising the state property tax rate by $1.54 per $1,000 of assessed value and enacting a safeguard rebate to offset these increases for households with low and middle incomes.&nbsp;</li><li><strong>Rebalance the tax code by enacting an excise tax on capital gains&nbsp;</strong>at a rate of 9.9 percent on profits from the sale of stocks, bonds, and other financial assets of more than $25,000 (or $50,000 for couples). Washington is giving away a $2.8 billion capital gains tax break to the wealthiest Washingtonians. While 41 other states have this common-sense tax, Washington gives the wealthy a break on huge profits they receive simply from moving their wealth around. Almost 90 percent of this capital gains tax would be collected from the richest 1 percent of Washingtonians. Gains from the sale of a primary home, retirement accounts, college savings plans, and other common investments would be excluded from the tax.&nbsp;</li><li><strong>Lift up working families by funding the <a class="external-link" href="../policy-areas/state-revenue/working-families-tax-rebate">Working Families Tax Rebate (WFTR)</a>.</strong> Based on the federal Earned Income Tax Credit (EITC), this rebate is a smart fiscal policy to help struggling families make ends meet. The EITC is one of the most powerful federal anti-poverty tools on the books. Including the WFTR in the Accountable Washington proposal keeps taxes from taking too big a bite out of family budgets for the lowest-income Washingtonians.&nbsp;</li><li><strong>Clean out 21 wasteful tax breaks </strong>that divert money out of classrooms and into the hands of special interests. To be clear, not all of Washington’s 700 tax breaks are bad policy, but many are outdated and no longer serve their original purpose. And others are simply giveaways to the powerful interests that finagled them into the tax code in the first place. Everybody benefits from excellent schools, clean air and water, safe roads, and accessible health care, so everybody should pitch in and pay their share.&nbsp;</li></ul>
<p>Our lawmakers have an historic opportunity to make some long-awaited repairs to our broken tax code, not only to provide a world-class education for Washington’s 1.6 million kids, but also to serve their parents, their teachers, their neighbors, and their entire communities. We believe they can do that through Accountable Washington.&nbsp;</p>
<p><strong>Check out this <a class="external-link" href="../files/Accountable_Washington_Fact_Sheet_FINAL.pdf/">fact sheet</a>&nbsp;on the proposal for more details.</strong></p>
No publisherKelli SmithProperty TaxEducationTax BreakState RevenueAccountable WashingtonCapital GainsWorking Families Rebate2017-02-27T23:43:16ZBlog EntrySenate Budget Includes Massive Tax Giveaway to Giant Media Corporationshttp://budgetandpolicy.org/schmudget/senate-budget-includes-massive-tax-giveaway-to-giant-media-corporations
<div class="discreet"><em>corrected version*</em></div>
<p>Those who believe that the $57 million in new tax resources included in the Washington State Senate's latest budget proposal represents a significant compromise in the ongoing budget negotiations are in for a big disappointment.</p>
<p>The new resources are no compromise from the Senate leaders’ rigid position of being against any new taxes to support schools and other priorities. Rather, they are a one-time payoff from large TV, cable, and media companies in exchange for a permanent tax cut that in the years ahead&nbsp;will&nbsp;cost the state millions of dollars that could have been used to help build a stronger economy.</p>
<p>Worse, this sweetheart tax deal sets a troubling precedent: It rewards businesses that don’t fulfill their civic duties and that evade paying the taxes that are needed to support safe communities, public infrastructure, and other investments that benefit all Washingtonians.</p>
<p>For at least the past six years, many large national media companies that supply TV shows, movies, and other content to local broadcast stations have been dodging Business &amp; Occupation (B&amp;O) taxes on their advertising and royalty-income-generating activities in Washington state.</p>
<p>Before 2010, these and certain other businesses were able to avoid paying taxes on their activities in Washington state if they had no employees, agents soliciting sales, or property located here. In 2010, lawmakers wisely <a class="external-link" href="what-is-economic-nexus-and-why-do-i-care/">plugged that tax loophole</a>, requiring these businesses to pay taxes on the portion of their incomes generated in our state.</p>
<p>But many large TV and cable companies failed to comply, avoiding about $11 million per year in B&amp;O taxes tied to their Washington-based advertising activities, according to estimates from the state Department of Revenue. And now there is a threat of legal action from national media conglomerates doing business in Washington state that would seek to prevent the Department from collecting their unpaid taxes and enforcing the law in the future.</p>
<p><a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?bill=6665&amp;year=2015">Senate Bill 6665</a> –&nbsp; heard in the Senate Ways &amp; Means Committee on March 11 along with the Senate’s latest budget proposal – would reward these businesses for shirking their responsibilities to Washington state. Companies in the mix would likely include multibillion-dollar corporations like Comcast-NBCUniversal and Fox Broadcasting Company.</p>
<p>Under the proposal, all fines and penalties assessed on unpaid taxes from June 2010 to July 2016 would be waived for any business that pays by October 2016. And the actual amount the companies owe in unpaid taxes from that time period would be <em>cut in half</em>.(1) Their tax responsibility moving forward would also be cut in half.</p>
<p>The upshot is that under SB 6665 there would be a one-time, $57 million boost in B&amp;O tax revenues in our state from national media corporations as they rush to take advantage of a massive giveaway of public money that they’d be crazy to turn down. The deal allows them to pay a mere fraction of their total unpaid tax bills now and receive a large permanent reduction later.</p>
<p>Far from being a needed breakthrough that would enable policymakers to make real progress on addressing the many challenges communities face across our state, the latest Senate budget is really just more of the same: unsustainable gimmicks and wasteful tax breaks for large, profitable corporations that don’t need them.</p>
<p><span class="Apple-style-span">(1) Under current law, these companies are required to pay B&amp;O taxes on about 2.2 percent of their total nationwide advertising income, which amounts to an estimated $730 million per year, <a class="external-link" href="https://fortress.wa.gov/ofm/fnspublic/legsearch.aspx?BillNumber=6665&amp;SessionNumber=64">according to the Department of Revenue</a>. But SB 6665 would permanently cap their Washington portion at 1.1 percent, or $360 million per year. Their cumulative tax bills on advertising revenue would be reduced from about $11 million per year to $5.6 million.</span></p>
<p class="discreet">&nbsp;<em>*The original version of this post incorrectly stated that any taxes national media companies owed to Washington state from before January 2012 would be entirely forgiven under SB 6665.</em></p>
No publisherAndy NicholasState BudgetTax Break2016-03-16T21:48:46ZBlog EntryCorporate Tax Break Accountability Proposals are Good for Washington’s Economyhttp://budgetandpolicy.org/schmudget/corporate-tax-break-accountability-proposals-are-good-for-washington2019s-economy
<p>State lawmakers should move quickly to approve several new bills<a class="external-link" href="http://housedemocrats.wa.gov/press-releases/group-of-house-democrats-unveil-corporate-tax-accountability-plan/"> introduced this week</a> by members of the House of Representatives to cut back on wasteful corporate tax breaks and to hold Boeing, a major beneficiary of state tax subsidies, accountable for shipping jobs out of state.</p>
<p>As the state legislature struggles to fulfill its state Supreme Court mandate to fund public schools and faces <a class="external-link" href="declining-revenue-projections-show-it2019s-time-for-policymakers-to-get-serious-about-meeting-washington2019s-needs">lower-than-expected projections for tax revenues</a>, this effort to scrutinize and weed out costly tax breaks is a fiscally sound move. These proposals would secure at least some new revenue for our schools and our state economy.&nbsp;</p>
<p>When lobbyists secured the largest state corporate tax subsidy in U.S. history for the Boeing Company in 2013, they assured lawmakers and the public that renewing and expanding aerospace tax breaks would allow the company to create many new jobs in Washington state. Since then, however, the company has terminated, or relocated to other states, thousands of Washington-based jobs. Yet Boeing continues to claim millions of dollars in annual state tax subsidies.</p>
<p><span class="Apple-style-span">To hold Boeing accountable for its use of Washington state tax break dollars,&nbsp;</span><a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?year=2015&amp;bill=2994">House Bill 2994</a>&nbsp;would<span class="Apple-style-span">&nbsp;require the company to contribute $2,500 to public K-12 schools for every job terminated or shipped out of state since November 2013. These tax breaks were intended by the legislature to maintain and grow aerospace jobs in Washington state. By actually tying the company’s eligibility for the tax breaks to in-state job creation and investments in the education of future workers, the bill&nbsp;would help ensure Boeing upholds its end of the deal going forward.</span></p>
<p>The proposals would also repeal or scale back four wasteful tax breaks – including a sales tax exemption claimed by oil refineries (<a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?year=2015&amp;bill=2990">HB 2990</a>); a business tax deduction on income from home mortgages (<a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?year=2015&amp;bill=2991">HB 2991</a>) that is claimed by large multinational banks despite being intended to help small community banks; a business tax exemption claimed by international banks (<a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?year=2015&amp;bill=2993">HB 2993</a>); and a sales tax exemption on large private jets purchased by corporations (<a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?year=2015&amp;bill=2992">HB 2992</a>). Removing these tax breaks would generate an estimated $60 million per year in new tax resources for schools in Washington state.</p>
<p>Washington’s schools should not continue to have outdated textbooks and overcrowded classrooms while multi-million and -billion dollar corporations are claiming tax breaks that don’t benefit the community as intended. These common-sense reforms are a step in the right direction. <br /><br /></p>
No publisherAndy NicholasState RevenueTax Break2016-02-20T01:44:34ZBlog EntryReport: To Create Jobs, Invest in the Success of 'Home-Grown' Businesseshttp://budgetandpolicy.org/schmudget/To%20Create%20Jobs%2C%20Invest%20in%20the%20Success%20of%20Home-Grown%20Businesses
<div><em>The following is from the Center on Budget and Policy Priorities' press release:</em></div>
<div><em><br /></em></div>
<p>New evidence finds that supporting "home-grown" startups and young, fast-growing in-state companies is likely to be a more effective strategy for states to create jobs and build a strong economy than attempts to lure businesses from elsewhere.&nbsp;&nbsp;</p>
<p><img class="image-right" src="/Jobs%20report%202%202016.jpg/image_preview" alt="Jobs Report 2 - 2-2016" /></p>
<p>In "<a class="external-link" href="http://www.cbpp.org/research/state-budget-and-tax/state-job-creation-strategies-often-off-base">State Job Creation Strategies Often Off Base</a>,"&nbsp;a new report from the Center on Budget and Policy Priorities, Senior Fellow Michael Mazerov and Director of State Fiscal Research Michael Leachman conduct new research showing that the vast majority of jobs are created by businesses that start up or are already present in a state. They conclude that "many state policymakers pursue economic development strategies that are bound to fail because they ignore these fundamental realities about job creation." When states pursue tax breaks, they divert resources needed to help home-grown startups and young, fast-growing companies deliver maximum job growth and to build a climate that supports their growth.</p>
<p>In the past, a lack of useful data severely limited research about which kinds of firms create jobs. Now, though, the federal government has developed databases that track over time the job-creation record of specific businesses of various sizes and ages while accounting for ownership changes. The U.S. Census Bureau has developed two such "longitudinal" databases. The U.S. Labor Department has developed one as well, and a private company using the Dun &amp; Bradstreet business registry has created yet another. &nbsp;&nbsp;</p>
<p>Research using the improved data has revolutionized our understanding of which businesses create jobs, and where they create them – calling into serious question the value of the various tax breaks states offer businesses to move. Among the facts that counter tax-cut strategies: &nbsp;&nbsp;</p>
<ul><li><strong>About 87 percent of 1995-2013 private-sector job creation in the median state was home grown.</strong>&nbsp;It came from startups, the expansion of employment at existing establishments, and the creation of new in-state locations by businesses already headquartered in the state.&nbsp;</li><li><strong>Jobs that move into one state from another typically represent only 1 to 4 percent of total job creation</strong> each year.</li><li><span class="Apple-style-span"><strong>To promote and assist job-generating entrepreneurship, state policymakers would be wise to invest in schools and colleges, improving workers’ skills, and maintaining communities that are attractive to residents who want to start a business. </strong>Successful entrepreneurs report these factors were key to where they founded their companies.&nbsp;</span></li><li><span class="Apple-style-span"><strong>The most commonly cited reason among entrepreneurs for starting their companies where they did was that it was where they lived at the time</strong>; 80 percent of them had lived for at least two years in the city where they started their companies.&nbsp;</span></li></ul>
<div>Many state and local governments are experimenting with various ways to boost the number and success rates of startups and young, fast-growing firms in an effort to determine which strategies will work best. In the meantime, the report’s authors conclude that policymakers should reject "new corporate relocation subsidies, and reconsider those already enacted."&nbsp;</div>
No publisherMelinda Young-FlynnTax Break2016-02-05T00:24:08ZBlog EntryRequiring Greater Accountability for Boeing Tax Breaks Should Remain a Priorityhttp://budgetandpolicy.org/schmudget/it2019s-not-too-late-to-bring-greater-accountability-to-boeing-tax-breaks
<p>Despite continuing to rake in big<a class="external-link" href="http://www.cnbc.com/id/102602739">&nbsp;profits</a>, the Boeing Company has eliminated more than 3,000 jobs in Washington state since November 2013 – when lawmakers granted the company <a class="external-link" href="http://ctj.org/ctjreports/2013/11/boeing_recipient_of_the_largest_state_tax_subsidy_in_history_paid_nothing_in_state_corporate_income.php#.Uw5PrPldVes">the largest state tax subsidy in U.S. history</a>. The tax breaks were supposed to encourage Boeing to “maintain and grow” its workforce in Washington state. Instead, thousands of workers have received pink slips or been told that they can either relocate out of the state or country or lose their jobs.</p>
<p>So how did this happen? It’s because Washington’s tax breaks aren’t structured in a way that encourage Boeing to create more jobs here. Other than a stipulation that some of the manufacturing facilities for its upcoming 777X jetliner must be built in Washington state, the company is essentially free to do as it pleases. Unlike other states where Boeing operates – including South Carolina, Illinois, and Missouri – our state doesn’t require the company to create or retain a single job in order to claim state tax breaks.</p>
<p><a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?bill=2147&amp;year=2015">House Bill 2147</a> would change that by refocusing Boeing’s tax breaks on job creation. Although the bill may now be moving into "missed opportunity" territory as the regular session comes to a close, it's still important to shine a light on why Washington state needs such a bill.&nbsp;The bill would help protect Washingtonians who work for Boeing by requiring the company to actually do its part to maintain and grow its workforce in Washington state or risk losing its tax subsidies. It ties the tax breaks directly to the number of jobs located in Washington state.</p>
<p>Essentially under the bill, Boeing’s tax breaks would be gradually reduced if its Washington-based workforce falls below November 2013 levels. For every 250 jobs below that baseline, its preferential business and occupation (B&amp;O) tax rate would increase by about 2.5 percent. The preferential rate would disappear completely if Boeing employment falls 5,000 below the November 2013 baseline. The company’s tax credits would similarly be reduced as employment falls.</p>
<p>If the 2015 legislative sessions end without the passage of the bill, Boeing will continue to claim more than $300 million per year in preferential business tax rates, business tax credits, and sales tax breaks until 2040. That’s no matter how many (or how few) workers it employs in Washington state.</p>
<p>A 2014 <a class="external-link" href="http://leg.wa.gov/jlarc/AuditAndStudyReports/documents/14-2.pdf">Legislative Auditor economic analysis</a> vividly spelled out the dangers of failing to act on this important measure. It found that in order for state aerospace tax breaks to have a net positive impact for the state economy, Boeing would need to make <em>continuous</em> investments in Washington state. A onetime investment in a new facility doesn’t cut it. That’s because the tax breaks for Boeing filter state money away from other investments that help build a strong state economy. They reduce the resources available for things like public schools and colleges, infrastructure, and public safety.</p>
<p>In other words, the tax incentive’s current structure doesn’t only mean that the company can keep reducing the size of its workforce in Washington; it also means taxpayers are subsidizing a multibillion-dollar corporation at the expense of the well-being of our communities.</p>
<p>We all want a thriving aerospace sector and the growth of good, living-wage jobs in our state. House Bill 2147 would help ensure that outcome by encouraging Boeing to make a firmer commitment to Washington. Although the 2015 regular legislative session is ending, policymakers could still revive this bill during the special session. It's an important piece of legislation that would be worthy of such a bold move by our elected officials.</p>
<p><em>Click <a class="external-link" href="http://www.tvw.org/index.php?option=com_tvwplayer&amp;eventID=2015030097#start=2978&amp;stop=6985">here</a> to see the testimonies from hardworking Boeing workers who support this bill. </em><br /><br /></p>
No publisherAndy NicholasState RevenueTax Break2015-04-24T16:57:28ZBlog EntryIn Support of the House's Revenue Proposalshttp://budgetandpolicy.org/schmudget/in-support-of-the-houses-revenue-proposals
<p><em>Senior Fiscal Analyst Andy Nicholas testified this morning in support of the House Revenue Package, HB 2224. Here's why the Budget &amp; Policy Center supports this common-sense bill:</em></p>
<p>House Bill 2224 is essential to ensuring the future prosperity of Washington state. By equitably and responsibly raising about $1.5 billion in new resources in the coming two-year budget cycle, the measure makes important investments in schools, health care, and other important priorities.&nbsp;</p>
<p>Attempting to fully fund basic education without the new resources included in HB 2224 would be deeply irresponsible. Such an approach would result in devastating cuts to higher education, health care, public safety, and other investments that create jobs, improve Washingtonians’ health and well-being, and help build a strong state economy.&nbsp;</p>
<p>The new&nbsp;revenue&nbsp;resources would come from capital gains tax, the closure of wasteful tax breaks, the implementation of the&nbsp;Washington State Market Place Fairness Act, and a Business and Occupation (B&amp;O) tax surcharge. The benefits of each are as follows:</p>
<p><strong><a class="external-link" href="../policy-areas/state-revenue/capital-gains">Capital gains tax:</a></strong></p>
<p>House leaders wisely followed Governor Inslee’s lead by including a new tax on high-end capital gains, or profits from the sale of corporate stocks and other financial assets. The tax would be:</p>
<ul><li><strong><em>An equitable source of revenue</em></strong>: Only 1.7 percent of households in Washington state would pay any additional taxes under this proposal – almost exclusively those at the very top of the income scale.</li><li><strong><em>A tool to help build a more sustainable tax system</em></strong>: Adding a rapidly growing component to Washington’s revenue mix would help create a more stable and dependable state tax system in the long run. <a class="external-link" href="volatility-claims-for-capital-gains-reform-are-overblown">Claims that the tax would be too volatile are overblown</a>.&nbsp;</li><li><em><strong>Good for our state economy</strong>:</em> The investments in schools and higher education that would be funded by the capital gains tax are crucial to Washingtonians’ long-term economic success. <a class="external-link" href="http://www.cbpp.org/cms/index.cfm?fa=view&amp;id=4141">There is no credible evidence that the tax would cause rich Washingtonians to leave the state</a> or that it would discourage wealthy families living in other states from moving here.</li></ul>
<p><strong>Closing wasteful tax breaks:</strong></p>
<p>Investing in programs that help create jobs would be much better for our state economy than wasting resources on failed tax breaks. House Bill 2224 would generate $300 million per biennium by eliminating seven wasteful tax breaks including those for prescription drug wholesalers, oil refineries, travel agents, software royalties, bottled water, non-resident shoppers, and banks.&nbsp;</p>
<p><strong>Washington State Market Place Fairness Act:</strong></p>
<p>Due to federal law, large out-of-state internet retailers have a huge advantage over small “brick and mortar” retailers located in Washington state: They don’t have to charge sales taxes on Washingtonians’ purchases. The Washington State Market Place Fairness Act is a bold proposal that would require the large multi-state businesses that have agreements with Washington state businesses to collect and remit state and local sales taxes to the Washington State Department of Revenue. This allows Washington state to:</p>
<ul><li><em><strong>Take action where congress has failed</strong>:</em> Congress has repeatedly failed to clarify federal law and allow states to require multi-state businesses to collect sales taxes. This act gives us the opportunity to make progress here in Washington state despite the deadlock at the national level.</li><li><strong><em>Create a level playing field</em></strong>: Continuing to allow overstock.com and eBay to avoid collecting sales taxes is unfair to small businesses located in Washington state that do have to collect them. Requiring out-of-state e-retailers to collect sales taxes on purchases made by Washingtonians would help small businesses have a better chance to compete.</li></ul>
<p><strong>Reinstate a B&amp;O tax surcharge and reducing taxes for small businesses:&nbsp;</strong></p>
<p>During the Great Recession, policymakers adopted a temporary 0.3 percentage point increase in the B&amp;O tax rate paid by businesses in the service industry, which expired in 2013. Reinstating that surcharge now would generate $530 million in new resources in the coming budget cycle to help fund schools and other important priorities. It is important to note that:</p>
<ul><li><em><strong>Taxes would be reduced for the smallest businesses in Washington state</strong>. </em>This surcharge would be paired with an increase in the small business credit - to $1,800 - thus eliminating B&amp;O taxes for any service-industry business with fewer than $100,000 per year in gross income. Businesses with up to $200,000 per year would benefit from the credit to some degree.</li><li><em><strong>This surcharge would help bring the tax system more in line with the modern economy</strong>. </em>For decades, consumers have been spending ever greater portions of their incomes on services like health care, cosmetic services, financial advice, and others. Increasing the B&amp;O tax rate that applies to these services would help the tax system keep pace with the changing economy.</li></ul>
<p>The bottom line is that these components of House Bill 2224 represent a smart, common-sense path to building a more prosperous state for all Washingtonians - and to creating a state where we all have the opportunity to make economic and social progress.</p>
<p><em><img class="image-left" src="/Progress%20Index%20Web%20Thumbs-02.png/image_mini" alt="PI cover thumbnail" />For further analysis on the need for increased revenue in Washington state, see the <a class="external-link" href="../policy-areas/progress-index/PI%20Revenue.pdf">Revenue section</a> of our new Progress Index. (Read the full <a class="external-link" href="../policy-areas/progress-index/Progress%20Index%202015.pdf">Progress Index</a> here.) And s</em><em>tay tuned to schmudget for more-detailed analysis on the budget and revenue proposals in the coming days.</em></p>
<div>&nbsp;</div>
No publisherMelinda Young-FlynnState RevenueCapital GainsTax Break2015-03-31T23:39:38ZBlog EntryBill to Improve State Tax Break Transparency Receives Public Hearinghttp://budgetandpolicy.org/schmudget/bill-to-improve-state-tax-break-accountability-and-transparency-receives-public-hearing
<p>This morning, members of the Washington State House Finance Committee heard public testimony on a measure that would give the public access to much-needed information about state tax breaks and the businesses and corporations that benefit from them. If approved, <a class="external-link" href="http://app.leg.wa.gov/billinfo/summary.aspx?bill=2134&amp;year=2015">House Bill 2134</a> would allow policymakers and the public to have more-informed discussions about our state budget and how we can best use our scarce state tax revenues.</p>
<p>HB 2134 is <a class="external-link" href="new-tax-break-transparency-legislation-is-a-small-step-in-the-right-direction/">similar to a tax break transparency measure (HB 2201)</a> that passed out of the House in the 2014 legislative session, but failed to receive a hearing in the Senate. The similarities between last year’s bill and HB 2134 are as follows:</p>
<ul><li><strong>HB 2134 would give the public access to information on businesses that receive tax breaks</strong>: The Department of Revenue (DOR) would be required to publicly disclose the name of any business that receives more than $10,000 per year in a tax break&nbsp;–&nbsp;&nbsp;as well as disclosing the total amount the business claims in preferential business and occupation (B&amp;O) tax rates, B&amp;O tax credits, and most major B&amp;O tax deductions. This information would be made available to the public via a searchable online database on DOR’s website.</li><li><strong>It would improve the quality of tax break information available to policymakers and state auditors</strong>: The current business tax return allows businesses to obscure details about their use of tax breaks by lumping multiple tax breaks into a small number of broad categories instead of reporting detailed information on each tax break. HB 2134 would prevent this by requiring businesses to itemize their use of each preferential B&amp;O tax rate, B&amp;O deduction, B&amp;O credit, and sales tax exemption. Doing so would give policymakers and state auditors more detailed information needed to conduct thorough performance evaluations of state tax breaks. More background details are available in <a class="external-link" href="improved-tax-break-accountability-starts-with-better-data/">this schmudget post</a>. </li><li><strong>It would improve and streamline reporting requirements for certain tax breaks</strong>: Under current law, there are public disclosure and reporting requirements attached to only a limited number of state tax breaks. To claim these breaks, businesses are required to file a report or survey with DOR detailing their use of these tax break dollars. However, much of the information mandated in these surveys and reports is of limited use to state auditors and policymakers. And much of it cannot be accessed by the public. HB 2134 would consolidate these surveys and reports into a single report that captures&nbsp; more useful information&nbsp;–&nbsp;&nbsp;including the amount of a tax break claimed, the types of jobs created by the tax break, and average salaries and benefits associated with those jobs. Further, all of the information in the new reports would be available to the public online.</li></ul>
<p>In addition, HB 2134 would reform DOR’s <a class="external-link" href="http://dor.wa.gov/content/aboutus/statisticsandreports/stats_ExemptionStudy.aspx"><em>Tax Exemption Study</em></a>. Under current law, DOR releases a report summarizing most state tax breaks every four years. HB 2134 would now require the report to be released every two years, making the available information more up-to-date and relevant to current budget discussions. It would also require the department to include information on audit recommendations associated with each tax break and other key pieces of information about how the tax system is performing. For various industries in Washington state, the report would detail effective tax rates, employment levels, average wages, and a breakdown of taxes paid.</p>
<p>Although HB 2134 includes important changes to the tax break system, it omits a key provision included in the 2014 bill that would greatly enhance accountability and transparency. Last year’s bill would have required large, publicly traded corporations to disclose to the public their total B&amp;O tax payments in addition to the value of the tax breaks they receive each year. As we’ve <a class="external-link" href="corporate-tax-dodge-findings-show-need-for-reforms-in-washington-state/">highlighted previously</a>, many major corporations, including Boeing and Microsoft, have a long track record of avoiding federal taxes. Requiring them to disclose how much they pay in Washington state taxes would shed light on whether they are dodging taxes here too.</p>
<p>Now more than ever, it is crucial that policymakers rigorously examine all forms of state spending – including spending on special-interest tax breaks – to ensure that those dollars are serving the public interest. If enacted, HB 2134 would be an important step toward creating a more balanced, transparent, and accountable process for measuring how our state invests in important public priorities.</p>
<p><em>Watch the Budget &amp; Policy Center's testimony on this bill <a class="external-link" href="http://tvw.org/index.php?option=com_tvwplayer&amp;eventID=2015020202#start=735&amp;stop=858">here</a>.&nbsp;<br /></em></p>
No publisherAndy NicholasState RevenueTax Break2015-02-21T00:52:57ZBlog EntryTestimony: Boeing Should Guarantee Good Jobs and Investment in Washington State in Exchange For Massive Tax Breakshttp://budgetandpolicy.org/schmudget/testimony-boeing-should-guarantee-good-jobs-and-investment-in-washington-state-in-exchange-for-massive-tax-breaks
<p>On Friday, September 19, 2014 the Budget &amp; Policy Center's Senior Fiscal Analyst, Andy Nicholas, along with Thomas Cafcas, a Researcher with Good Jobs First,&nbsp;testified before the Citizen Commission For Performance Measurement of Tax Preferences about tax breaks for the aerospace industry in Washington state. Below is the written testimony&nbsp;Andy submitted to the Commission.</p>
<p align="center"><em></em></p>
<p><em>Good afternoon Mr. Chair and members of the Commission. Thank you for giving me the opportunity to testify this afternoon. <br /></em></p>
<p><em>For the record, my name is Andy Nicholas. I am the Senior Fiscal Analyst at the Washington State Budget &amp; Policy Center, which is an independent, non-profit research organization that focuses on building a just and prosperous future for all Washingtonians.<br /></em></p>
<p><em>We strongly support the Legislative Auditor’s recommendation for policymakers to establish minimum performance goals, such as specific job retention and creation targets, for Washington state’s aerospace tax breaks. <br /></em></p>
<p><em>Like most Washingtonians, we are proud of our state’s aerospace legacy. We are also proud to be the home of dynamic, cutting edge companies like Boeing and its many suppliers and partners. To ensure our aerospace investments benefit Washington state, it is critical that policymakers properly structure incentives to reward businesses for creating new jobs here.&nbsp; <br /></em></p>
<p><em>However, under current law aerospace companies can claim Washington tax breaks while shipping jobs out-of-state, undermining the central goal of these incentives. You may recall that in January 2014, just two months after the latest round of aerospace tax breaks were approved by policymakers, Boeing began to ship thousands of Puget Sound-based engineering jobs to California and other states. <br /></em></p>
<p><em>To prevent further job losses and more wasted resources, we recommend amending these incentives so that only those businesses that invest in Washington state and create new jobs here are able to benefit from them. Going forward, this would help ensure that the legislature’s specific goal for these tax breaks, which is “to maintain and grow Washington’s aerospace industry workforce” is achieved.<br /></em></p>
<p><em>This can be accomplished by building in better safe guards that would allow the Department of Revenue to deny or recoup tax break dollars from businesses that ship aerospace jobs out of state. Policymakers could also restructure these tax breaks to ensure they more accurately reward the desired activity – creating good jobs here in Washington state. This could be done by converting the current preferential business and occupation (B&amp;O) tax rates applied to aerospace activities into credits that are allocated on a per job basis – $2,000 per job, for example. <br /></em></p>
<p><em>Although, current law includes some accountability provisions, they are not sufficient. For all the billions of dollars in state tax breaks aerospace companies will claim in the coming years, there are no guarantees that total aerospace employment will grow as result.<br /></em></p>
<p><em>You may hear that job guarantees and accountability measures would be too onerous for businesses to comply with. However, as my colleague Thomas Cafcas from Good Jobs First will discuss in more detail, job guarantees and accountability provisions are commonly built into tax breaks in other states. Furthermore, such commonsense transparency measures have not been overly burdensome for businesses that benefit from tax breaks offered in other states.<br /></em></p>
<p><em>The Legislative Auditor’s analysis of these tax breaks vividly shows the dangers of continuing Washington state’s aerospace subsidies without adding more robust accountability provisions. The Auditor modeled three potential scenarios related to the effectiveness of these tax breaks. The third scenario, which assumed Boeing accepted state tax breaks but failed to create new jobs in Washington state, resulted in nearly 5,000 jobs lost and billions of dollars in squandered resources. That could be Washington’s future should policymakers fail to add specific job creation targets and better safeguards to our state aerospace tax breaks.<br /></em></p>
<p><em>In sum, we are proud of Washington’s aerospace legacy and we support smart investments that strengthen and grow our bonds with Boeing and other members of the industry. However, in exchange for the large public investments we make in aircraft manufacturing and design, requiring Boeing to uphold its end of the deal with job creation and investment guarantees is not too much to ask. To that end we strongly support amending these tax breaks to include specific job creation targets, as recommended by the Legislative Auditor. To improve the effectiveness of these tax breaks, we also support adding accountability measures to the law that would deny tax breaks to companies that ship jobs out of Washington state.<br /></em></p>
<p><em>Again, thank you for giving me the opportunity to testify this afternoon. I would be happy to answer any questions you may have.</em></p>
No publisherAndy NicholasState RevenueTax Break2017-04-11T18:23:10ZBlog EntrySenate’s Proposed Tax Breaks Would Cost Big In The Long Runhttp://budgetandpolicy.org/schmudget/senate2019s-proposed-tax-breaks-would-cost-big-in-the-long-run
<p>Despite a looming <a title="A Paramount Duty: Funding Education for McCleary and Beyond" class="internal-link" href="/reports/a-paramount-duty-funding-education-for-mccleary-and-beyond">deadline from the State Supreme Court</a> to invest an additional $4.5 billion per two-year budget cycle in Washington state schools by 2018, last week the Senate put forward a supplemental budget plan that included 18 costly new or extended tax breaks.</p>
<p>Although these tax breaks are projected to have a relatively small, $10.3 million impact on the current 2013-15 state budget, if enacted, their costs would balloon to nearly $120 million by the 2017-19 budget cycle (see table).1.</p>
<p>&nbsp;</p>
<p align="center"><a title="2014_TaxActions" class="internal-link" href="/images/Feb2014_TaxActions_HouseVSenate.jpg"><img class="image-inline" src="/images/Feb2014_TaxActions_HouseVSenate.jpg/image_large" alt="2014_TaxActions" /></a></p>
<p>&nbsp;</p>
<p>By contrast, similar to <a class="external-link" href="http://www.ofm.wa.gov/budget14/education/default.asp">a plan put forward earlier this year by Governor Inslee</a>, House leaders proposed to eliminate several wasteful tax breaks and take other actions that would generate more than $280 million by the 2017-19 budget cycle for basic education reforms (see table).</p>
<p>The bottom line is that the Senate’s plan to enact a raft of new tax breaks now is short-sighted, irresponsible, and will only make it more difficult for future policymakers to fully fund basic education and other important investments.</p>
<h2>Senate Proposed Tax Actions</h2>
<p>The tax actions proposed by the Senate with the largest <em>negative</em> impact in the 2017-19 budget cycle include:</p>
<ul><li>Extending a tax break for “server farms” (-$50 million);</li><li>Extending and modifying tax breaks for high-tech companies (-$39 million); and</li><li>Enacting new tax and fee breaks for certain liquor retailers (-$11 million).</li></ul>
<h2>House Proposed Tax Actions</h2>
<p>Tax actions proposed by the House with the largest <em>positive</em> impact during the 2017-19 budget cycle include:</p>
<ul><li>Extending the Other Tobacco Products Tax to “e-cigarettes” ($77 million);</li><li>Changing a sales tax break for Oregonians to a rebate program ($70 million);</li><li>Eliminating a tax break for oil refineries ($55 million);</li><li>Eliminating a sales tax break on bottled water ($48 million); and</li><li>Eliminating a tax break for prescription drug wholesalers ($39 million).</li></ul>
<p>Stay tuned to schmudget. We’ll have more details on tax actions proposed in 2014 over the next few days.</p>
<p class="discreet">1.Technical note: this analysis examines only proposed tax actions, or changes in tax law that would alter the amount owed by a taxpayer(s) in future years compared to the current year. It does not include other revenue changing actions, such as diverting revenue streams, or so-called “budget driven revenue” measures.&nbsp;&nbsp;</p>
<p>&nbsp;</p>
No publisherAndy NicholasState RevenueTax Break2015-01-08T02:07:36ZBlog EntryCorporate Tax Dodge Findings Show Need for Reforms in Washington Statehttp://budgetandpolicy.org/schmudget/corporate-tax-dodge-findings-show-need-for-reforms-in-washington-state
<p>Now that we know nine major corporations with operations in Washington state&nbsp; paid <em>zero or less</em> in federal corporate income taxes in recent years despite reaping huge profits, serious questions arise as to&nbsp; whether these corporations or others are dodging Washington state taxes too.</p>
<p>Washingtonians could get answers if the Senate acts to approve<a class="external-link" href="http://apps.leg.wa.gov/billinfo/summary.aspx?bill=2201&amp;year=2013"> HB 2201</a>, a measure that would significantly improve tax break transparency and corporate accountability. Although this measure was approved by the House on February 18,<strong> <em>it hasn’t even been scheduled for a public hearing in the Senate</em></strong>.</p>
<p>The federal tax information comes from a <a class="external-link" href="http://itep.org/itep_reports/2014/02/the-sorry-state-of-corporate-taxes.php#.Uw41fvldVes">new report</a>, released by the Institute on Taxation and Economic Policy and Citizens for Tax Justice. It found that 111 large corporations in the U.S. paid no federal corporate income taxes in at least one year between 2008 and 2012. Many of them actually received sizable tax refunds during the years in which they paid no taxes, despite making enormous profits.</p>
<p>At least nine of the 111 corporate tax dodgers have activities in Washington state (see table). They are Boeing, CenturyLink, Domtar, Facebook, H.J. Heinz, Honeywell International, Paccar, Praxair, and Yahoo. Highlights from the report include:</p>
<ul><li><strong>Boeing</strong> – the recent recipient of the <a class="external-link" href="http://ctj.org/ctjreports/2013/11/boeing_recipient_of_the_largest_state_tax_subsidy_in_history_paid_nothing_in_state_corporate_income.php#.Uw5PrPldVes">largest state tax subsidy</a> in US history – paid no federal corporate income taxes in all five years examined in the study. The company received $822 million in refunds despite nearly $15 billion in profits during this period. </li><li><strong>Paccar</strong>, a multinational technology company based in Washington state, paid no taxes in three of the four years examined, while making&nbsp; $775 million in profits. </li><li><strong>Honeywell International</strong> received refunds amounting to $510 million over two profitable years.</li></ul>
<p align="center">&nbsp;<a title="WATaxDodgers" class="internal-link" href="/images/TaxDodging01.jpg"><img class="image-inline image-inline" src="/images/TaxDodging01.jpg/image_preview" alt="WATaxDodgers" /></a></p>
<h2>Is it happening here?</h2>
<p>Are these corporations avoiding Washington state taxes too? It is impossible to know&nbsp; because almost all company-specific tax information is confidential under state law.</p>
<p>The limited information that <em>is</em> publicly available reveals that six of the nine federal corporate tax dodgers identified in the report have also claimed tax breaks in Washington state recently (see table). For example, Yahoo, which paid no federal corporate income taxes in one of the years examined in the study, got $252,000 from claiming&nbsp; <a class="external-link" href="let-the-sun-set-on-an-ineffective-tax-break-for-high-tech-businesses">a wasteful Washington state tax break</a> for research and development activities.</p>
<p>Yahoo and the other companies listed in the table might be claiming many more state tax breaks or engaging in other tax avoidance strategies in Washington state. But without reforms lawmakers and the public will remain in the dark about whether corporations are adequately supporting the health, education, public safety, and other investments that benefit their workers and shareholders.</p>
<h2>Corporate transparency reforms needed</h2>
<p><a class="external-link" href="http://apps.leg.wa.gov/billinfo/summary.aspx?bill=2201&amp;year=2013">House Bill 2201</a> would shed much-needed light on individual corporations’ tax payments in Washington state. Among other things (detailed <a class="external-link" href="improved-tax-break-accountability-starts-with-better-data">here</a> and <a class="external-link" href="new-tax-break-transparency-legislation-is-a-small-step-in-the-right-direction">here</a>), the measure would require all large, publicly-traded corporations operating in Washington state that claim more than $10,000 per year in state tax breaks to disclose information about their state business and occupation (B&amp;O) tax payments, including:</p>
<ul><li>All income generated in Washington state subject to the B&amp;O tax;</li><li>The amounts claimed in preferential B&amp;O tax rates, tax credits, and certain other tax breaks; and</li><li>Bottom-line tax payments.</li></ul>
<p>Approval of <a class="external-link" href="http://apps.leg.wa.gov/billinfo/summary.aspx?bill=2201&amp;year=2013">HB 2201</a> would provide lawmakers and the public with basic information essential for&nbsp; more reasoned&nbsp; decisions about tax and spending policies in the years ahead.<br /><br /></p>
No publisherAndy NicholasState RevenueTax Break2015-01-08T02:01:47ZBlog Entry